Wall Street is Praying for a Crude Rally

Despite evidence pointing to the contrary, Wall Street’s finest are out in full force today, upgrading oil stocks without regard for sensible thinking.

From Mother Merrill to shithouse firms like Keybanc, analysts are desperately trying to catch lightening in a bottle, swaddling the seasonality waves, for the benefit of us all.

Even CLR, the unhedged lunatics, were upgraded today.

What does this tell us?

Any semblance of a rally in the price of WTI and a massive rally in oil stocks will take place. However, should this trade fail to materialize by the end of January, there will be a lot of bag holders out there. Remember, price has memory and right now there are a lot of trades being placed–betting that oil gets a respite rally.

S&P futures have recovered. Stocks are dying to rally.

Big China bear out with a compelling research note today, pointing to the looming debt bubble in China and how it usually portends to a cataclysm of monumental proportions.

“Historically, any country that grew debt this fast inevitably ran into financial system problems, including currency devaluation, banking recap, and high inflation, and we do not expect China to be an exception,” asserts Cui. “We believe that the government had maintained system stability over the past few years by allowing various implicit guarantees to get firmly entrenched, which has made the financial system fragile.”

The fragile equilibrium that has endured, he says, is a function of Chinese policymakers’ willingness to trade short-term gain for longer-term pain.

(Of note: Cui’s call doesn’t include a full-scale credit crunch—the disappearance of what’s increasingly become the lifeblood of the Chinese economy—as a prerequisite for the prophesied carnage in equities.)

The A-shares market, according to Cui, is expensive—and if you strip out banks (for which the quality and sustainability of earnings may be in jeopardy in light of a deteriorating loan book), it only gets pricier.

Chinese stocks are doomed. The Dry Bulk Index is at new lows. The price of oil is tanking daily. ISIS is cutting off the heads of people for walking sideways. Donald J. Trump is going to be the next President of the United Steaks.

Need I say more?

European markets are off by 0.7%. Asian markets fell by 0.5%. And U.S. Futures are indicating a lower open of about 0.5%.

Commodities, however, are to the upside, which bodes well for a possible buy the opening dip scenario.

Nevertheless, we seem to be mired in a bit of a slump, fueled by an uncertain China, asinine Federal Reserve, and milquetoast U.S. Corporate profits outlook.

There is no redemption when trading savage markets.

Chinese markets were comfortably higher this evening and now they’re plunging lower. No worries, however. I am sure the PBOC will inject some liquidity, arrest some short sellers, and halt trading in any stocks showing weakness, before the session is over–to show gains.

In the interim, Asian markets are lower. U.S.futs are flat and the world, as we know it, is still scheduled to end.

We’ve all come to look up to FANG (FB, AMZN, NFLX, GOOGL). Before Amazon got going, the A represented Apple. Now we all hate apple, despise its openly gay CEO, and hope that its share price suffers grave consequences for their many years of wanton debauchery.

Last year, the average stock got poleaxed, while FANG outperformed. Let’s look at the numbers.

Median 1 yr return: up 75%
Total market cap: $1.2 trillion
Median Quarterly rev growth: 23.5%
Median Price/sales: 7.5x
Median Free cash flow ttm: $5.23 bill
Median FPE: 74

Let’s break down the p/s on an individual level, comparing today’s valuation against previous years.

If long this portfolio of stocks, you own 4 companies with exceptional growth, entrenched markets with moats, that are spitting out immense free cash flow. The one issue, naturally, is valuation. Trading at 75x next year’s earnings places you in some serious non-systematic risk, should anything derail the gravy train these companies are on. At the same token, thanks to their growth rates, the price/sales valuations, more or less, have been constant for the past 3 years.

In no way do these stocks exhibit traits of being in a bubble, since valuation has remained somewhat constant with share price appreciation. However, I seriously doubt you will see another 75% 1 year return for these 4 stocks.

Bottom line: I think markets trade lower, so of course there is individual stock risk owning FANG. But if you’re bullish on stocks and think large cap growth is where the allocations will go, there aren’t many better choices than these 4 stocks, despite their gigantic runs.

As sure as I am sitting here, crude oil is going to do the exact opposite of what Mr. Gartman predicted this evening.

All of the cool VC guys are long the Bitcoin. From Frederick Wilson to The Vinklevoss (sp?) Twins, it’s all the rage in unicorn town.

Since the epic rise and fall of BTC, the price has stabilized and has rebounded sharply in recent months.

“Mike Tyson Bitcoin” is the most secure kind of Bitcoin app. The user keeps the keys to Bitcoin wallets, so you’re 100% in control of your money. Plus, its software is open source, which means that code flaws can be spotted and fixed in public.

But that isn’t saying much. The value of a bitcoin fluctuates wildly. Almost no business out there actually accepts it as cash. And if you lose the keys to your Bitcoin wallet, you can kiss your computerized money goodbye.

Still feeling confident? The app’s fine print warns, “We cannot guarantee that there will be no bugs in the software.”
How reassuring.

That’s the thing about Bitcoin. While this digital cash shows that there can indeed exist an Internet-based money system without government control, its independence also makes it relatively unreliable. The FDIC insures the money in the bank. There’s no such safeguard here.

Tyson’s sponsorship of this app also shows that Bitcoin isn’t taking off as a serious consumer product — even as banks start to recognize the potential of Bitcoin software.

Bitcoins are completely worthless, digitized, pyramid schemes, marketed to the masses of anarchistic “V for Vendetta” wannabees, who display their boldness and displeasure with capitalism through this, sordid, thing.

The Mike Tyson Bitcoin app is sure to knock you out.

I know you were rooting for the 3 o’clock rally, desperately trying to salvage the first trading session of 2016. But you only played yourself, made yourself look like an orangutan with a banana in his ear.

The fucking Chinese market fell 7% in 7 minutes last night. Communist officials are “disappearing” people on a daily basis. Commodities are in the pits of hell. And there is approximately $300 billion in oil and gas debt that can go bad.

And you want to buy stocks because…?

Someone needs to tell you this; it might as well be me, HORATIO CLAWHAMMER.

Stocks aren’t done hammering lower. Get in their way, and it’ll be your face that gets the hammering. Your best bet, for the time being, is TLT. Go chill in some treasuries, collect monthly dividends, and watch some Netflix, as that stock careens lower.

Two thousand and sixteen will be the year when FANG (Facebook, Amazon, Netflix, Google) gets poleaxed.

“We will trade the ranges, without emotions, and avoid outsized positions in lunatic industries.”

Go write that 100 times, or until you start to believe it.

Is there any hope for Apple? Last I heard, Tim Cook was planning on building an Apple car. So you mean to tell me that delving into the automobile business, instead of the no-brainer television business, is the preferable course of action for the company?

I don’t blame Tim. Who can? He just isn’t Steve. Steve’s come about the market once a generation. There is nothing Tim can do other than manage the company and try not to blow it up.

Thus far, he’s done an ok job.

The problem with Apple, with regard to the market, is two fold.

The laws of large numbers are kicking in and the companies market cap is gigantic. Any measurable decline is going to wreak havoc on the broader indices.

Maybe Apple should build a space ship and send Tim to the moon? Or, maybe Apple should just make the fucking teevee already and tackle the electric car down the road.

The founding fathers had no idea, whatsoever, how stupid the people in Chicago would become. As such, President Barrack Obama is fixing, alongside his trusty AG, to take executive action to take your guns away.

At the top of the list is an effort to expand background checks on gun sales by forcing more sellers to register as federally licensed gun dealers. The changes would be aimed at some unregistered sellers who skirt the background check laws by selling at gun shows, online or informal settings. Other moves being considered include improving reporting of lost and stolen weapons and beefing up inspections of licensed dealers, according to a person familiar with the plans.

Ted Cruz had this to say about the rumored 2nd ammendment assault:

“Pres. Obama, you may have a phone and a pen. Well if you live by the pen, you die by the pen and my pen has an eraser”

Christie called Obama a ‘petulant child’, just prior to eating an entire box of devil dogs. And Trump said a whole bunch of stuff. I am sure you can figure it out.

Skeptics say there isn’t much Obama can do, other than limit the scope of gun shows and force more people to get licenses. We shall see.

Shares of SWHC and RGR are sharply higher today.